Computer maker AST Research Inc. said Wednesday that it has reduced last year’s previously reported income by $22.2 million as part of its ongoing struggle to absorb a Texas factory it bought from Tandy Corp.
The reduction follows a review of the company’s records by the U.S. Securities and Exchange Commission related to a pending investment by a South Korean electronics company in AST.
The accounting charge, which reduces the company’s results for the fourth quarter of 1994 from a $14.1-million profit to an $8.1-million loss, won’t affect AST’s current operations, said Bruce Edwards, the company’s chief financial officer. “It’s a pretty technical accounting issue,” he said.
The revision occurred after AST executives discovered that the value of the Texas plant’s portable computer inventories did not meet expectations.
AST paid $105 million to Tandy Corp. in 1993 to buy the plant in Fort Worth, which propelled AST into the ranks of the world’s top 10 personal computer makers in sales. But integrating the factory into the rest of AST’s worldwide operations proved difficult.
The company has lost $69.4 million, or $2.15 a share, in the first nine months of the current fiscal year, and said much of the losses were related to the Texas plant.
The Tandy purchase also became a sore point with many AST employees. The company shut down its Fountain Valley plant, laying off 900 workers and moving production to Fort Worth and the Far East.
To stem its losses, AST executives struck an agreement with Seoul-based Samsung Electronics Co. last February that executives say will give AST capital to match the growth of larger, more profitable competitors such as Compaq Computer Corp. and IBM.
The agreement--worth $378 million in cash, plus $75 million in debt relief--must be approved by AST shareholders at a meeting set for June 30. If approved, Samsung would control 40% of AST’s stock.
The income change for the fourth quarter was made in order to obtain SEC approval to schedule the meeting, said Edwards, the AST executive.
AST had reported in a previous filing that it had received inquiries from the SEC regarding its purchase of Tandy’s facilities.
AST’s stock rose 25 cents a share to close at $17.625 Wednesday on volume of 389,900 shares in Nasdaq trading.